Tax bill would cost Smyth County

If a proposed state House bill seeking to limit localities’ collection of machinery and tools tax had passed last year, Smyth County’s personal property tax would need to increase 3 percent to offset the resulting loss of $419,000 in revenues.

That was the message County Commissioner Jeff Richardson took to the county supervisors Thursday evening as they reviewed legislation before the General Assembly this session that could affect the county.

“HB 512 is one of the biggest ones out there that we need to be aware of quickly,” Richardson told the supervisors.

Delegate Harry R. Purkey (R- 82) has for three years introduced the bill that would exempt machines and tools from taxation for the first three years after they are brought into the locality, according to Richardson.

“Whenever a manufacturer brings new equipment into the county, for the first three years it would be classified as intangible, meaning it is not assessable,” Richardson said. “You can’t tax it.”

The bill came within two votes of passing the first year it was introduced, but failed to get out of committee last year, according to Richardson.

If the legislation had been enacted last year, localities would be precluded from assessing machines and tools for 2010, 2009 and 2008 for a $419,102 loss of revenue, he said.

Taken from normal machine and tools tax receipts of $1,270,000, “that’s a loss of 33 percent within that classification,” Richardson said.

Richardson said if the bill is passed the county has two areas within personal property assessments in which to make up the resulting loss -- automobiles and real estate. A personal property tax rate increase of three cents on the dollar would be needed to offset the loss.

“This bill has real impact,” Richardson said. Rural areas that host numerous industries would be affected more than urban areas that do not. As an example of the disparity, Richardson said Fairfax County has one machinery and tools account producing tax revenue.

According to records in Richardson’s office, Smyth has 70.

And Smyth would not be alone in taking hits to revenue if the bill passes. He gave the supervisors calculations by his staff showing Chilhowie would lose $14,281 this year were the bill in effect, and Saltville would lose $34,901. Marion does not tax machinery and tools.

According to Richardson, Purkey modified the bill that in an earlier form would have cost Smyth County between $700,000 and $800,000.

Previewing his presentation earlier in the day Thursday, Richardson said the bill’s intent is to provide incentive for manufacturers to operate in Virginia.

“All of us want to encourage industry,” Richardson told the supervisors, “but I have a problem with how this is presented.”

He said an economic impact statement accompanying the bill shows it would have no effect on state revenues, but the burden “is all on the back of localities.”

According to Richardson, the bill represents an unfunded mandate. “If you believe in the concept of industrial development, that’s a noble cause,” he told the supervisors. “If you believe in legislation to provide a tax break, you should also believe in funding it.”

He said a comparable bill has been introduced in the state senate.

Richardson said he is communicating his concern about the proposed bill to other commissioners of the revenue as well as legislators who are also likely to hear from the supervisors.

dkegley@wythenews.com